Joy for landlords in South Africa

Rentals have increased to an eight-year high in South Africa, which is good news for landlords as they continue to make up for the low or negative returns following the pandemic. 

This is according to the latest PayProp Rental Index, which showed that rentals have improved, while tenant arrears have declined in South Africa.

Rental growth for the quarter reached 5.6%, which is 0.4% above last quarter and the highest level since the 5.9% we recorded in Q3 2017. 

This growth is also not limited to one or two provinces but is nationwide. Even Mpumalanga, which had been on the brink of negative growth after two consecutive quarters of decline, rebounded to avoid that outcome. 

The report noted that only three provinces saw slightly slower rental growth compared to Q4 2024, and in two of those cases, growth still exceeded the national average.

“Low inflation during the quarter meant that the healthy real-terms rental growth seen in Q4 already has continued into 2025,” noted PayProp. 

The Consumer Price Index stood at 3.2% in January and February before falling to just 2.7% in March, indicating that the gap between rental growth and inflation has widened significantly.

This gap hit 2.8% in February and March, the largest recorded during the current rental growth cycle.

This real-terms rental growth strengthened the case for interest rate cuts. While the Reserve Bank moved cautiously at the start of the year, cutting the repo rate by only 25 bps, it followed up with another cut in May. 

PayProp said this second cut is “likely to boost tenant affordability while also increasing activity in the property sales market.”

However, PayProp cautioned that global trade tensions and a likely economic slowdown could temper further rental growth. 

“Despite this, the residential rental sector is healthy across all metrics, with strong tenant demand bolstering the market,” PayProp said. 

“Landlords are effectively recovering from the low or negative rental growth they faced during the pandemic.”

Affordability is key 

One of the strongest indicators of the rental market’s health is tenant payment behaviour, which is encouraging. 

Unlike the spike in arrears in Q1 last year, there was no such jump in early 2025. The percentage of tenants in arrears dipped to 17.0%, matching the lowest level ever recorded by PayProp. 

The average value of rent in arrears, tracked over five years, has dropped from more than a full month’s rent in Q3 2020 to just 77.1% in Q1 2025.

In the Western Cape, tenants continue to show the strongest payment behaviour in the country. 

Just 13.7% of tenants were in arrears in Q1—up slightly from Q4 but still the lowest share nationally. Additionally, tenants in arrears owed just 60.2% of their rent, the lowest in the country.

Other provinces are more volatile. In KwaZulu-Natal, the arrears rate held steady at 19.4%, the third highest in the country, but this remains the lowest level recorded in the province in over five years. 

In Limpopo, despite sharp rental growth, arrears remain moderate. Just 17.1% of tenants were behind on rent.

The Eastern Cape presents a more mixed picture. The share of tenants in arrears climbed to 19.3%, though still lower than a year earlier. 

The average amount owed increased as well, reaching 71.6%. While still below the national average, the trend suggests rising pressure on tenant finances in the region.

Gauteng, meanwhile, continues to see improvement. The arrears rate dropped significantly to 20.8%, still the highest in the country, but a meaningful improvement from 24.2% in the previous quarter. 

However, those in arrears owed more, with the average percentage owed rising to 96.5%, again the highest in the country.

The Northern Cape showed strong performance in terms of arrears. Just 15.6% of tenants were behind on rent, the second lowest nationally.

Arrears in the Free State remain volatile. From being the second-worst province for arrears two quarters ago, it improved to one of the best in Q4 2024, only to settle into the middle in Q1 2025 at 18.6%. 

Tenant risk assessments provide more good news for landlords. According to PayProp, 39.6% of applicants assessed in Q1 2025 fell into the minimum risk category, indicating a strong ability to meet rental obligations. 

“At the other end of the scale, 26.0% of applicants were assessed as high risk,” the report noted. The rest were divided into low (20.0%) and medium (14.5%) risk brackets.

This marginal year-on-year increase in minimum risk tenants, from 39.2% in Q1 2024, further supports the view that South Africa’s rental market is stable. 

For landlords and rental agents, it’s the most promising start to a year in almost a decade.